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UPDATE 7-Brent slips towards $110 on recession worries

Published 09/05/2011, 10:39 AM

* Weak U.S. economic data raises fears of double-dip recession

* HSBC China services PMI hits historical low in August

* Storm shuts in more than half of U.S. Gulf crude oil output (Adds detail, comment, updates prices)

By Christopher Johnson

LONDON, Sept 5 (Reuters) - Brent crude oil fell towards $110 a barrel on Monday as fears of another U.S. recession and slowing growth elsewhere raised the prospect of lower demand for fuel.

China's services sector grew in August at the lowest pace on record, a private survey showed on Monday, as new orders ebbed and tightening measures to rein in an exuberant property sector started to pinch.

Global growth in services came to a virtual standstill last month as new business all but dried up, adding to fears that the world economy is facing a double-dip recession.

U.S. jobs data came in worse than expected on Friday, adding to worries about the U.S. economy.

Stock markets and the euro -- battered by the debt crisis -- continued to fall on Monday while the dollar rose against other currencies. The dollar often moves inversely to oil and other key commodities because they are generally priced in the U.S. currency on international markets. MKTS/GLOB]

ICE Brent futures for October fell $2.14 to a low of $110.19 before recovering slightly to trade around $110.40 by 1420 GMT. U.S. crude futures were down $2.40 at $84.05 a barrel. Volume was relatively light with U.S. markets closed for Labor Day.

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"Oil is falling on worries over weak demand, unemployment and talk of a double-dip recession," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

Christopher Bellew, broker at Jefferies Bache in London, agreed, saying the market had come under additional pressure with a fall in the value of the euro .

"The background is one of poor economic growth and worries over demand. The euro is under a lot of pressure and equities have been weak all day," Bellew said.

STORM WATCH

Providing some support for prices was oil companies' shutdown of more than half the crude production in the U.S. Gulf of Mexico due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.

Lee reached Louisiana's coast early on Sunday, but was moving inland slowly. High winds grounded helicopters on standby for oil and gas companies that would have otherwise ferried workers post-storm assessments and restaff facilities.

Another storm, Hurricane Katia, intensified over the open Atlantic on Sunday, bulking up to a powerful Category 2 storm, the U.S. National Hurricane Center said.

The Miami-based hurricane center said it was still too soon to gauge the potential threat to land or to the U.S. East Coast with any certainty. But most computer models showed the storm veering on a northeast track out to sea after moving safely west of the mid-Atlantic island of Bermuda later this week.

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The European Union imposed a ban on purchases of Syrian oil on Saturday and warned of further steps unless President Bashar al-Assad's government ended its crackdown on dissent.

In Libya, soldiers supporting the new interim government made ready to storm a town held by loyalists of Muammar Gaddafi, but held off in the hope a surrender would avoid bloodshed.

The EU has lifted sanctions on Libyan ports and oil firms, but few expect the country's normal oil production -- around 1.6 million bpd -- to be restored soon, after a civil war halted its oil sector this year.

Olivier Jakob, managing director of oil market consultants Petromatrix in Zug, Switzerland said Thursday would be a key day for markets with the meeting of the European Central Bank and a U.S. presidential speech about job creation:

"Global financial markets are still under a lot of stress (if not under increasing stress) and our opinion remains that in this environment a low risk-profile needs to be observed," Jakob said. (Additional reporting by Francis Kan in Singapore; editing by William Hardy)

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